Amid the resurrection of the 737 Max plane and the imminent launch of vaccines for the novel coronavirus, Boeing (NYSE:BA) stock has rallied sharply over the last month, as shares gained about 30% in that time.
Nonetheless, I expect the airplane maker’s shares to climb much further over the next six months as those trends intensify. Consequently, I recommend that longer-term investors buy the stock at this point.
Government after government is approving the restoration of Boeing’s problematic 737 MAX plane to service, and at least a few airlines have announced plans to resume ferrying passengers with the planes relatively soon. Moreover, at least two carriers recently announced orders for 737 MAX planes.
Specifically, the U.S. and Brazil have both approved the resumption of commercial flights by the MAX. For its part, the EU has declared the plane “safe to fly” and is looking to approve its return to service starting next month. And in a very positive sign for the plane’s outlook as well as the future of Boeing stock, Reuters last month indicated that more countries look poised to approve the plane after the EU does so.
Air Carriers Line Up
Boeing recently delivered a 737 MAX” plane to United Airlines (NASDAQ:UAL).” And by the end of this month, the airline is slated to receive an additional eight 737 MAX planes.
More impressively, Ireland’s Ryanair earlier this month agreed to exercise an option to buy 75 of the planes. In 2021, 50 of those planes are slated for delivery.
Among the carriers that have announced plans to resume using the airplane for commercial flights by the first quarter of next year are Alaska Air, American Airlines, and United Airlines.
Vaccines Are Coming
With American and European drug companies having created successful vaccines for Western countries and China set to distribute vaccines within its own borders and to many developing nations, it looks like there will soon be enough vaccines to protect most of the world from the coronavirus.
Even now, as people become less worried about the coronavirus, in line with my previous predictions, many Americans have become more willing to fly. As evidence of that fact, consider that the 3 million travelers who went through U.S. airport checkpoints from Friday through Sunday immediately after Thanksgiving marked the “biggest crowds since mid-March, when the COVID-19 crisis took hold in the United States,” as The Associated Press recently pointed out.
And as I earlier predicted , lockdowns have become much less popular amid widespread rejection by many scientists, by businesses and consumers. In America and Europe, only a few U.S. states and a couple of European nations appear to be using large-scale lockdowns. And even the formerly super-pro-lockdown Dr. Anthony Fauci has realized that the U.S. cannot stomach more lockdowns.
As a result of these trends and the rapidly approaching vaccines, I do not expect demand for flying to ever again come close to the extremely low levels we saw in April and May. Moreover, I anticipate that the purchase of airplane tickets will steadily rise for the next couple of months before really taking off in March, April, and May, when the majority of the world’s population will likely be vaccinated.
And after the majority of the world is vaccinated, and the coronavirus finally fades from the headlines, I expect to see extremely strong pent-up demand for travel. As a result, airlines should become much more optimistic about the outlook of their businesses, causing them to order thousands more planes from Boeing by the middle of 2021.
Meanwhile, after the MAX has flown without any serious incidents for several months, most of the world’s airlines will be ready to resume ordering large numbers of the plane.
Bottom Line on Boeing Stock
With the mass distribution of the vaccines and widespread acceptance of the MAX both likely to start within several months — and Boeing stock price still about 50% below its 52-week highs — now is a great time to buy the shares.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Roku, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.